Uber’s ride-sharing: Just the tip of the iceberg for Australia’s emerging ‘sharing economy’

blog Those of you who keep a close eye on vehicle sharing developments around the world will recall that on-demand ride service company Uber, which has traditionally worked with taxi and private car hire companies to make it easier for passengers to book a car, deployed a new aspect to its service internationally in April 2013. Dubbed ‘ride-sharing’, the service allows anyone with a car to offer lifts to anyone else, for a price. The service competes directly with rivals such as Lyft and SideCar, which have launched in the US but which have not yet achieved any traction in Australia.

Up until now the service hasn’t caught much attention in Australia, although Uber and rivals such as GoCatch and Ingogo have been steadily growing in Sydney, in coopetition with existing taxi and private car hire companies. However, late last week the issue came to the fore as Victorian Transport Minister Terry Mulder said the state’s Taxi Services Commission, chaired by former ACCC chair Graeme Samuel, was investigating Uber’s ride-sharing service. The Sydney Morning Herald reports (we recommend you click here for the full article):

“On the face of it, Mr Samuel believed that Uber was not complying with the Victorian public transport legislation. “If they are not complying with the law we’ll prosecute,” he said.”

The obvious impetus for most of the angst is the amount of revenue being pulled in by taxi organisations and taxi drivers all around Australia, who have predominantly seen the uptake of services such as Uber, GoCatch and Ingogo as a positive up until now, due to the fact that they boost taxi utilisation rates and hence individual drivers’ revenues. The new ride-sharing service, on the other hand, has the potential to pass revenue off to private car owners.

Such services threaten taxi revenues; and predictably the Australian taxi organisations are in an uproar already. State Governments also make a lot of money from regulating the taxi industry, especially selling lucrative taxi plates, meaning they too have quite a bit to lose if taxi utilisation rates sink.

However, there’s also quite a lot of indication that ride-sharing is ultimately to the benefit of consumers due to lower costs and increased freedom of choice, and that the dangers of consumers using unregulated individual car ride-sharing services may be exaggerated. US technology magazine Wired published an excellent yarn last week on the wider issue in general. The magazine reported (we recommend you click here for the full article):

“The sharing economy has come on so quickly and powerfully that regulators and economists are still grappling to understand its impact. But one consequence is already clear: Many of these companies have us engaging in behaviors that would have seemed unthinkably foolhardy as recently as five years ago. We are hopping into strangers’ cars (Lyft, Sidecar, Uber), welcoming them into our spare rooms (Airbnb), dropping our dogs off at their houses (DogVacay, Rover), and eating food in their dining rooms (Feastly). We are letting them rent our cars (RelayRides, Getaround), our boats (Boatbound), our houses (HomeAway), and our power tools (Zilok). We are entrusting complete strangers with our most valuable possessions, our personal experiences—and our very lives. In the process, we are entering a new era of Internet-enabled intimacy.

This is not just an economic breakthrough. It is a cultural one, enabled by a sophisticated series of mechanisms, algorithms, and finely calibrated systems of rewards and punishments. It’s a radical next step for the ­person-to-person marketplace pioneered by eBay: a set of digi­tal tools that enable and encourage us to trust our fellow human beings.”

What the Wired article makes clear is that the Uber ride-sharing service is just the tip of the iceberg. The United States is going through a remarkable wave of capitalist change at the moment, driven by the encroachment of the ‘sharing economy’ on traditionally regulated market structures. I would suggest to Ministers such as Terry Mulder and regulators such as Graeme Samuel that they need to look at this phenomenon in greater depth before passing judgement on this specific aspect of it.

It will be interesting to see how things develop as more and more ‘sharing economy’ services hit Australia over the next several years. I suspect such platforms will be quickly taken up by consumers and will provide valuable niche alternatives to large corporate services, while regulators will struggle for at least the next decade trying to work out how or whether they should be controlled.

11 COMMENTS

Uber isn’t ride sharing. It’s a taxi alternative service. It’s IMO a success not only because it’s cheaper but because it’s better than existing taxi services. Give me a choice between Uber and taxi at the same price and I’ll go Uber every time

yeah but uberX (or uberPOP in Aust) is still just and ad Hoc taxi service. You tell the driver where you want to go and they get paid to take you there. Hardly ride sharing. And it’s actually my favourite part of uber!

… but not too far. I’ve been refused a taxi ride home from the melbourne CBD because it was too far to Mt Dandenong, and similarly been refused because it’s too short to go to Kew. I’ve since learned to not reveal my destination till I’m in the car when they can’t legally tell you to get out because they don’t want to drive you, and at which point you can get their details to report them.

Competition is good, there should be a level playing field though. UberX is basically a taxi service, either they are subject to the same regulations that the taxi industry is or the taxi industry should be subject to less regulations.

Good article Renai – these co-production systems are very interesting as an alternative to the traditional structures where trust requires heavy duty corporations and government regulation (trust the yellow coloured taxi because you know the government is regulating the taxi industry etc.) Instead this top down trust model is replaced by a bottom up peer-to-peer model which can actually be better because it is based on a much finer grained series of real time feedback loops.

Both models have their flaws but the one thing that is clear is that the peer-to-peer model enabled by the Internet and social media is evolving at a much faster pace than traditional regulated models are capable of evolving.

The peer-to-peer model, however, requires (and encourages) intelligent engaged consumers … whereas the regulated model encourages consumers to rely on the ‘Nanny State’ to protect them while they go blithely about their day. One good outcome of peer-to-peer model like eBay is that customers are required to actually positively engage in the safety of their transaction rather than simply rely on some form of institutional safety net. eBay, like Uber, however, is not for everyone. Caveat emptor.

1. What are the rego and insurance implications when using your own car to run a business?
2. What are the income tax implications for you as a driver?
3. What are the tax implications for Uber itself when taking 20% of your earnings?
4. Since Uber sets the rate for the trip, can you refuse it if it is too small an amount?
5. Once the other competitors come on board, will price wars happen (as in San Francisco)?
6. Once it catches on, will it end up being overrun by cowboys and hacked by mischief makers?
7. Exactly how does Uber get Police checks on drivers? Can I get a Police check on somebody?
7. Isn’t 20% rather a high commission rate for Uber since the driver is already giving “cheap” rides, paying for petrol, car maintenance and tolls?

Personally I see this as being attractive for passengers while fares are cheaper but not sure how the drivers will really get much economic benefit.
The problem is, you only hear from passengers who are happy to save money and those running the system who are making easy money.
It seems to me there is a risk the drivers may end up as unhappy as Taxi Drivers and Pizza Delivery people, doing a lot of work but not making much money.

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